Why Open Banking Is the Next Frontier for Financial Innovation

There are cases when industry regulatory changes (coupled with government funds) have brought about widespread change and innovations. One need not look any further back to the mandate to migrate healthcare records to electronic formats under the America Recovery and Reinvestment Act in 2009 (seeded with $20 Billion in Federal Funds) to recognize the advent of a prodigious change in how healthcare is tracked and managed in the U.S. since. The same may be said for regulations coming into force in 2018, namely PSD2 in the EU and Open Banking in the UK. The regulatory change in all cases shifts sovereignty over an individual’s data to said individual.

The big question facing banks in Britain and beyond is how can they transition from being holders of customer data to actually challenging the agility and ease of use that their fintech counterparts provide. With open banking, PSD2 and the global consumer appetite for the uberisation of banking, the opportunity for fintechs are unprecedented. Banks may need to rise to the challenge, according to experts, or prepare to be toppled off the throne.

Improving the fluidity of personal data while at the same time returning the control of that data to the hands of the individual is one of the promises of the information age we live in. When governments and regulators take steps to responsibly eliminate legacy barriers while retaining oversight and fair practices, the individual wins, and we all benefit as a result with a richer and more diverse marketplace. At least that is the vision, and like healthcare in the U.S. other steps to properly implementing technology will likely be needed to realize that vision.